SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO
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.
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Commission File Number 0-23153
VOLU-SOL, INC.
(Exact name of small business issuer as specified in its charter)
Utah 87-0543981
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
5095 West 2100 South
Salt Lake City, Utah 84120
(Address of principal executive offices) (Zip Code)
(801) 974-9474
(Issuer's telephone number)
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No __
As of August 9, 1999, the issuer had issued and outstanding 2,702,202 shares of
common stock, par value $.0001.
Transitional Small Business Disclosure Format
(Check One):
Yes No X
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-1-
This Amendment No. 1 to the Quarterly Report on Form 10-QSB of Volu-Sol,
Inc., is submitted to amend the following ItemS, which originally were
submitted as part of the Quarterly Report filed with the Securities and Exchange
Commission as of August 16, 1999:
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Page
No.
Item 1. Financial Statements
Unaudited Condensed Consolidated Balance Sheets as of June 30, 1999...3
Unaudited Condensed Consolidated Statements of Operations for
the three and nine months ended June 30, 1999 and 1998................4
Unaudited Condensed Consolidated Statements of Cash Flows for
the nine months ended June 30, 1999 and 1998..........................5
Notes to Unaudited Condensed Consolidated Financial Statements........6
2. Management's Discussion and Analysis or Plan of Operation.............7
Pursuant to SEC Rule 12b-15, the foregoing Items, as amended hereby, are set
forth below in their entirety.
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PART I
ITEM 1 - Financial Statements
VOLU-SOL, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS
June 30,
1999
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Current assets:
Cash and cash equivalents $ 21,318
Accounts receivable, less allowance for doubtful accounts of $2,188 75,212
Inventories 166,083
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Total current assets 262,613
Property and equipment, net 126,361
Other assets 19,347
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Total assets $ 408,321
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 30,859
Accrued liabilities 22,560
Preferred stock dividends payable 110,220
Accrued interest payable -
Notes payable -
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Total current liabilities 169,639
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Commitments and contingencies
Stockholders' equity:
Preferred stock, $.0001 par value; 10,000,000 shares authorized 15,157 shares
outstanding (aggregate liquidation preference $3,053,656) 3,031,319
Common Stock, par value $.0001; 50,000,000 shares authorized, 2,702,202 shares
issued and outstanding 270
Additional paid-in capital 1,760,194
Preferred stock subscriptions receivable (900,000)
Accumulated deficit (3,647,101)
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Total stockholders' equity 244,682
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Total liabilities and stockholders' equity $ 408,321
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The accompanying notes are an integral part of these unaudited
condensed consolidated balance sheets.
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VOLU-SOL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
1999 1998 1999 1998
------ ------ ------ ------
Sales $ 134,954 $ 143,809 $ 385,686 $ 381,097
Cost of goods sold 66,926 104,503 239,035 322,844
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Gross Margin 68,028 39,306 146,651 58,253
Selling, general and administrative expenses 137,484 184,042 648,173 535,149
---------------- -------------- -------------- --------------
Loss from operations (69,456) (144,736) (520,248) (476,896)
Other income (expense):
Interest Income (12) 1,536 140 4,081
Interest Expense (10,134) (7,826) (18,864) (27,432)
---------------- -------------- -------------- --------------
Net loss before provision for income taxes (79,602) (151,026) (520,248) (500,247)
Provision for income taxes 100 - 300 -
Net loss $ (79,702) $ (151,026) $ (520,548) $ (500,247)
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Dividends on Series A preferred stock (34,388) (18,290) (100,220) (205,370
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Net loss applicable to common stock $ (114,090) $ (169,316) $ (630,766) $ (705,617)
--------------- ------------- -------------- --------------
Net loss per common share - basic and diluted (0.04) (0.08) (0.23) (0.33)
---------------- -------------- -------------- --------------
Weighted average common shares outstanding 2,702,000 2,111,000 2,693,000 2,111,000
---------------- -------------- -------------- --------------
The accompanying notes are an integral part of these unaudited
condensed consolidated statements.
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VOLU-SOL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Nine Months
Ended June 30,
1999 1998
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ (520,548) $ (500,247)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation 59,920 59,771
Provision for losses (983)
Preferred stock issued for services 265,000 -
(Increase) Decrease in:
Accounts receivable (11,516) (6,478)
Inventories 2,488 (14,813)
Other assets 17,118 (12,140)
Decrease in:
Accounts payable (18,628) 23,805
Accrued liabilities (15,109) (5,260)
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Net cash used in operating activities: (222,255) (455,362)
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Cash flows from investing activities Cash flows from financial activities:
Proceeds from sale of preferred stock 131,502 270,000
Proceeds from notes payable 96,000 -
Principal Payment (117,856)
Net cash provided by financing activities 227,502 152,144
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Net increase (decrease) in cash 4,907 (307,594)
Cash, beginning of period 16,412 337,691
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Cash, end of period $ 21,318 $ 30,097
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The accompanying notes are an integral part of these
unaudited condensed consolidated statements.
-5-
VOLU-SOL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) PRESENTATION OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying interim condensed consolidated financial statements of
Volu-Sol, Inc. and Volu-Sol Reagents Corporation, its wholly owned subsidiary
(collectively, the "Company"), have been prepared consistent with generally
accepted accounting principles for interim financial information in accordance
with the instructions to Form 10-QSB and Item 310 of Regulation S-B.
Accordingly, such unaudited financial statements do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments, consisting only of normal recurring adjustments, necessary to
present fairly the financial position, results of operations and cash flows of
the Company for the interim periods presented, have been included. Operating
results for the nine months ended June 30, 1999 are not necessarily indicative
of the results that may be expected for the year ended September 30, 1999. The
Company suggests that these condensed consolidated financial statements be read
in conjunction with the financial statements and notes thereto included in the
Company's Form 10-KSB for the year ended September 30, 1998.
(2) RELATED-PARTY TRANSACTIONS
From March 5, 1997 through June 30, 1999, the Company borrowed money from
Biomune Systems, Inc. its former parent ("Biomune") totaling $486,500. At March
31, 1999, the amount owed Biomune was $400,961, payable pursuant to a promissory
note bearing interest at an annual rate of ten percent and due on demand.
Biomune sold the note during the nine months ended June 30, 1999. The note was
paid in full by the Company by issuing 2,011 shares of its Series A Preferred
Stock at the request of the new noteholder.
(3) INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out method) or
market value. Inventories consist of the following as of June 30, 1999:
Raw materials, packaging and supplies $ 39,635
Instruments, biological stains and reagents 126,449
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$ 166,084
(4) SERIES A PREFERRED STOCK
As of June 30, 1999, the Company has $900,000 of subscriptions receivable from
the sale of 4,500 shares of Series A Preferred Stock. During the nine months
ended June 30, 1999, the Company sold shares 657.5 of Series A Preferred Stock
for $131,500 in cash. During the nine months ended June 30, 1999, the Company
issued a total of 13,025 shares of the company's Series A Preferred Stock as
commissions for consulting services provided to the Company. The Company also
issued 2,011 shares of Series A Preferred Stock in satisfaction of the Note. The
Series A Preferred Stock became convertible into Common Stock beginning January
1, 1998. The "conversion price," which is the basis for such conversion, is the
lesser of (i) 80% of the average closing bid price of the Company's Common Stock
for the three trading days immediately preceding the date of conversion or (ii)
$1.25 per share. An investor that subscribed to 6,000 shares of the Company's
Series A Preferred at $200 per share has paid $300,000 of a total $1,200,000
subscription.
(5) NET LOSS PER COMMON SHARE
Basic net loss per common share ("Basic EPS") excludes dilution and is computed
by dividing net loss by the weighted average number of common shares outstanding
during the period. Diluted net loss per common share ("Diluted EPS") reflects
the potential dilution that could occur if stock options or other contracts to
issue Common Stock including convertible Preferred Stock were exercised or
converted into Common Stock. The computation of Diluted EPS does not assume
exercise or conversion of securities that would have an anti-dilutive effect on
net loss per common share. Because the Company has incurred a loss for the
periods presented, no exercises or conversions have been considered as they
would be anti-dilutive, thereby decreasing the net loss applicable to common
shares.
During the nine months ended June 30, 1999 the Company issued 490,795 shares of
Common Stock, as part of the original divestiture, in the nature of a dividend.
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At June 30, 1999, there were outstanding options to purchase 446,100 shares of
Common Stock and there were 8,724 shares of Series A Preferred Stock convertible
into a minimum of 1,395,840 shares of Common Stock, neither of which are
included in the computation of Diluted EPS because they would be anti dilutive.
The options all relate to options to purchase Biomune common stock outstanding
at the time of the divestiture. The holders of such Biomune options were also
granted options to purchase Volu- Sol common stock.
(6) SUBSEQUENT EVENTS
Following June 30, 1999, the Company sold 140 shares of Series A Preferred Stock
for net proceeds of $28,000.
ITEM 2 - Management's Discussion and Analysis or Plan of Operation
Until October 1, 1997, the Company was a division and then a wholly
owned subsidiary of Biomune. Effective October 1, 1997, Biomune divested itself
of the Company by distributing Volu-Sol Common Stock to holders of Biomune
Common Stock as of March 5, 1997. Since October 1, 1997, the Company has
operated as a separate entity. The following discussion and analysis should be
read in conjunction with the Company's unaudited condensed consolidated
financial statements and the notes thereto contained elsewhere in this report.
The discussion of these results should not be construed to imply that any
condition or circumstance discussed herein will necessarily continue in the
future.
Results of Operations
Comparison of the Three Months Ended June 30, 1999 to the Three Months Ended
June 30, 1998.
During the three months ended June 30, 1999, the Company's revenues
totaled $134,954 compared to $143,809 for the three months ended June 30, 1998.
This decrease in revenues resulted primarily from a decrease in sales of
reagents.
Cost of revenues for the three months ended June 30, 1999 totaled
$66,926 compared to $104,503 for the three months ended June 30, 1998. The
overall gross margin for the three months ended 1999 was 50% of revenues
compared to 27% of revenues for the comparable three months ended in 1998. The
increase in the gross margin on sales of stains and reagents is attributable to
shipping charges that are now being paid by customers as well as a price
increase that was implemented in March 1998. The increased gross margin results
from a continued effort to create a leaner production team and better inventory
management.
Selling, general and administrative expenses totaled $137,484 for the
three months ended June 30, 1999, compared to $184,042 for the three months
ended June 30, 1998, an overall decrease of $46,561. This decrease is attributed
to a continued effort to create a leaner management team.
Interest expense increased from $7,826 for the three months ended
June 30, 1998 to $10,134 for the three months ended June 30, 1999. The increase
in interest expense is due to additional borrowings from Biomune during the
period.
The Company incurred a net loss applicable to common shares of
$114,066 for the three months ended June 30, 1999 compared to a net loss
applicable to common shares of $169,316 for the three months ended June 30,
1998.
It is anticipated that net losses applicable to common shares will
increase in the future due to dividend requirements associated with the Series A
Preferred Stock. As of June 30, 1999, the Company had remaining subscriptions
receivable totaling $900,000. If only those subscriptions are collected and no
further sales of Series A Preferred Stock are made, the net loss applicable to
common shares would increase by approximately $225,000 for the one-time charge
related to the beneficial conversion feature and by approximately $90,000 per
year for recurring dividends at 10%.
Comparison of the Nine Months Ended June 30, 1999 to Nine Months Ended June 30,
1998
During the nine months ended June 30, 1999, the Company generated
revenues totaling $385,686 compared to $381,097 for the nine months ended June
30, 1998. This increase in revenues is mainly attributable to increased sale of
Volu-Sol stains.
Cost of revenues for the nine months ended June 30, 1999 totaled
$239,035 compared to $322,844 for the nine months ended June 30, 1998. The
overall gross margin for the nine months ended June 30, 1999 was 38% of revenues
compared to 5% of revenues for the comparable nine months ended in 1998. This is
attributable to a more efficient production team and an increase in prices
implemented March 1998.
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Selling, general and administrative expenses totaled $648,173 for the
nine months ended June 30, 1999, compared to $535,149 for the nine months ended
June 30, 1998, an overall increase of $113,024. This increase is due to expenses
associated with compliance with periodic reporting requirements of securities
laws and distribution of the Company's shares in connection with its divestiture
by Biomune.
The Company incurred a net loss applicable to common shares of
$630,766 for the nine months ended June 30, 1999 compared to a net loss
applicable to common shares of $705,617 for the nine months ended June 30, 1998.
This decrease in net loss is primarily due to a decrease in selling, general and
administrative expenses as well as a reduction in cost of goods sold.
Liquidity and Capital Resources
The Company currently is unable to finance its operations solely from
its cash flows from operating activities. From October 1, 1993 through March 31,
1999, Biomune financed the Company's operations through a series of loans and
other capital contributions. The Company also sold shares of Series A Preferred
Stock to provide additional working capital.
The Company believes that cash generated by operations, together with
the proceeds from additional sales of its securities will be sufficient to meet
its capital requirements for a minimum of twelve months.
As of June 30, 1999, the Company had cash of $21,318 and positive
working capital of $92,974 compared to cash of $16,411 and negative working
capital of $145,665 as of September 30, 1998.
During the nine months ended June 30, 1999, the Company's operating
activities used cash of $222,255, much of which was provided by the sale of
Series A Preferred Stock and funds borrowed from Biomune. During the nine months
ended June 30, 1998, the Company's operating activities used cash in the amount
of $298,915, which was provided by the sale of Series A Preferred Stock. During
the nine-month period ended June 30, 1999, the Company repaid the note to the
new shareholder by issuing 2,011 shares of Series A Preferred Stock to the new
noteholder. The Note has been cancelled and the Company has no further
obligations thereunder.
The Company has no credit facility with any commercial lending
institution. In the past, the Company borrowed and received capital from time to
time from Biomune, but the Company has no formal financing arrangement,
agreement or understanding for debt financing in the future.
The unaudited condensed consolidated financial statements of the
Company have been prepared on the assumption that the Company will continue as a
going concern. The Company's product line is limited and the Company has relied
upon borrowings and financing from the sale of its equity securities to sustain
operations. Additional financing will be required if the Company is to continue
as a going concern. If such additional funding cannot be obtained, the Company
may be required to scale back or discontinue its operations. Even if such
additional financing is available to the Company, there can be no assurance that
it will be on terms favorable to the Company. In any event, such financing will
result in immediate and possible substantial dilution to existing shareholders.
Forward-looking Statements and Certain Risk Factors
Statements which are not historical facts contained in this report
are forward-looking statements. Section 21E of the Securities Exchange Act of
1934, as amended, provides a safe harbor for forward-looking statements. In
order to comply with the terms of the safe harbor, the Company cautions that a
variety of factors could cause the Company's actual results to differ materially
from anticipated results or other expectations expressed in this report. The
forward-looking statements contained in this Management's Discussion and
Analysis or Plan or Operation also contemplate a number of risks and
uncertainties that could cause actual results to differ from projected or
anticipated results. The risk factors discussed in Part I, Item I ("Business")
and in the "Management's Discussion and Analysis or Plan or Operation" (Item 6)
of the Company's Annual Report on Form 10-KSB for the fiscal year ended
September 30, 1998 may also affect actual operating results.
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
VOLU-SOL, INC.
Date: August 16, 1999 By: /s/ W.W. Kirton, III
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Wilford W. Kirton, III,
Chief Executive Officer
Date: August 16, 1999 By: /s/ Michael G. Acton
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Michael G. Acton,
Acting Principal Accounting Officer